Technology companies from outside China are often looking for the best information and means to enter the booming Chinese tech sector. Francis "Chip" Peters is a Commercial Officer in Shanghai with the United States Commercial Service, which offers a range of services to American firms interested in entering the China market. Part of his job is to provide usable information for technology firms ready to enter China.
Without the same government connections and funds for legal support, is China a viable market for smaller American software firms hoping to penetrate the Chinese market?
Many US small and medium size enterprises have consistently grown their businesses exporting to the Chinese market. The companies that tend to be the most successful study the China market, business culture, and industry trends before entering. In addition, they determine what services and resources are available to assist them.
The US Commercial Service offers many valuable products and services to US firms exporting their products and services abroad. We have offices in 84 countries internationally and 105 locations in major cities throughout the US. Through our network of contacts, we help US companies identify partners, distributors, and end-users for their products and services.
We also offer a range of services for US companies. For example, we offer the Single Company Promotion service to provide companies a high-visibility venue to present their products or services to a tailored audience of Chinese clients. Through our Customized Market Research service, companies can order research to assess the potential for their particular product in the China market.
In terms of the software sector, we have seen strong opportunities for application and customized software in the finance, education, and manufacturing industries. In addition, high-end products such as database management systems, systems management software, networking security software, and manufacturing industry application software have been some of the fastest growing areas.
To learn more about the products and services of the US Commercial Service in China, visit www.buyusa.gov/china
How can the US Commercial Service help American technology businesses source partners in China, for example in the microelectronics manufacturing sector?
The US Commercial Service provides a number of programs to help American companies find partners in China. For example, the Gold Key Service is our flagship service to help US companies find distributors, agents, or sales partners. As part of this service, we first focus on understanding the products and expectations of the US company. We then contact local firms, prescreen the most promising ones, and arrange appointments between those firms and the US company.
In addition to the services and programs already mentioned, the US Commercial Service also supports tradeshows and organizes buying delegations to trade events in the US. These programs have been particularly effective for the microelectronics industry. For example, we support the Semicon show every year in Shanghai, counseling US exhibitors, sharing insights on the Chinese market, and facilitating meetings with Chinese buyers. We also lead delegations to the US as part of our International Buyer Programs. At the Semicon West event in San Francisco, we have been active in bringing Chinese companies to the US looking to source products.
Are there common mistakes you see that American tech firms make when entering China?
While the China market offers many opportunities for US companies, it also entails many challenges. Companies should take the time to carefully create a business plan that anticipates potential competitors, accounts for a rapidly developing economy, and includes an exit strategy if the business is not successful.
The most common mistakes we see relate to lack of preparation. Some companies are too quick to sign an exclusive distributor agreement with a local business whose resources and objectives do not match the US company's needs. Another example of poor preparation is when companies rush to set up a representative office, without fully understanding their business needs or demand for their products. In many instances, it would be more practical to find a business partner first.
US firms also should be fully aware of laws in China that will impact their company. At the onset of any business arrangement, firms should seek professional, legal counsel before signing any contract. Overlooking this step can have serious consequences, limiting legal recourse. We often provide US firms with a list of local and international attorneys to contact for legal advice.
What are typical things that American technology exporters might have good prospects importing into China, and what areas are more difficult either because of market or regulatory barriers?
According to the US Census Bureau, in 2006 China was the fourth largest export market for US goods and services. Technology products, in particular electronic components and telephony equipment, were a large part of that amount. In general, information technology, software, and telecommunications are all good opportunities for US companies selling to China.
But technology-exporting companies need to be aware of regulations, standards, and licenses that pertain to products in their industry. For example, a number of telecommunications products require the China Product Compulsory Certification Mark in order to be sold in China.
In addition, US firms exporting technology products may need to obtain an export license issued by the US government. Products that meet this requirement usually involve dual-use technologies, with both a civilian and a military use. There remains a misconception, however, that applying for an export license will lead to export denial. Over 99% of last year's export license applications to the Department of Commerce to sell goods to China were approved.
How is the US government currently working with American companies to foster better Intellectual Property Rights protections in China?
The US government recommends that companies establish a clear strategy to handle the challenges of protecting their IPR in a complex and frequently ineffective legal environment. More specifically, companies should consider how to structure their business transactions to minimize risks of intellectual property theft and how to protect and enforce their rights in the most economical and cost effective way.
It is vital that companies understand that intellectual property is primarily a private right and that the US government cannot enforce rights for private individuals in China. It is the responsibility of the rights' holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. For example, US companies should consider the timely prosecution of infringements of patents and trademarks, including filing within relevant priority periods for IPR assets of concern. In certain instances, rights holders may also wish to advocate for criminal or administrative enforcement by Chinese government agencies, in addition to enforcement taken directly by complaint of the rights holder.
It is also recommended that small and midsize companies understand the importance of working together with trade associations and organizations to support efforts to protect IPR and stop counterfeiting. There are a number of these organizations, both China or US-based. These include: American Chambers of Commerce in China; Quality Brands Protection Committee (QBPC); R&D-based Pharmaceutical Association Committee (RDPAC); United States Information Technology Office (USITO); Motion Pictures Association (MPA); and International Federation of Phonographic Industries (IFPI).
The US Mission in China, in conjunction with US-based IPR agencies, is interested in supporting US companies and innovators in their efforts to understand and effectively utilize China's intellectual property system. The US Mission advocates, where appropriate, for improved IPR policies, which we believe are in the best interests of both the US and Chinese governments. The US Mission's IPR efforts include the offices of the US Department of Commerce (including the US Patent and Trademark Office and US & Foreign Commercial Service), US Department of State, US Trade Representative, Department of Homeland Security (Customs), and Federal Bureau of Investigation, among others. US companies may also be interested in attending the US Ambassador's annual roundtable on IPR issues, as well as various panel presentations organized by the US Embassy, including the US Commercial Service, as well as other organizations.
Some other excellent resources for companies coming to China include:
– For an overview regarding obtaining and enforcing intellectual property rights visit: www.stopfakes.gov
– The "China IPR Toolkit" provides information on China's current IPR environment, as well as IPR prevention measures. The site is: http://beijing.usembassy-china.org.cn/ipr.html
– For US small and medium-size companies, the Department of Commerce offers a "SME China IPR Advisory Program" available through the American Bar Association that provides one hour of free IPR legal advice. For details, visit this link.
Francis "Chip" Peters can be contacted at [email protected].